A Study on the Determinants of Investment in Non-Performing Loans : Focusing on Individual Investor Satisfaction
Abstract
According to the financial sector, the average delinquency rate for won-denominated loans at the five major banks stands at 0.46%, and indicators related to non-performing loans (NPLs) have also shown a worsening trend. While real estate transactions have contracted due to a tightening of liquidity caused by a prolonged economic slowdown and stringent government regulations, the NPL market is experiencing an unprecedented boom as loans with reduced repayment capacity have become non-performing in large numbers. Investing in NPLs is considered a method that offers both stability and high returns, as it involves acquiring secured debts with first or second-priority repayment rights under mortgages, making fund recovery relatively easy. Furthermore, since sufficient relevant information can be secured during the process of acquiring the debt, it is advantageous for compensating for the lack of information encountered in auctions or public sales and for reducing the risk of loss. It was found that when evaluating investment satisfaction, it is necessary to give greater importance to external environmental factors, such as real estate market price outlooks and government regulatory policies, in addition to the physical characteristics of the collateral assets. Furthermore, this suggests that external environmental factors act as the most important determinants in investments in real estate-backed non-performing loans (NPLs), implying that investors are highly sensitive to market conditions, policy changes, and price outlooks. Additionally, profitability and price factors serve as key variables directly linked to the investment return structure, while legal rights emerged as an important consideration in terms of legal stability. Conversely, location showed relatively low influence, which is interpreted as indicating a decision-making structure distinct from that of physical real estate investment.